Agriculture has traditionally been the backbone of the African economy; responsible for about 25-40% of the region’s GDP. The continent is home to 60% of the world’s uncultivated arable land which could support the growth of a variety of crops that could feed more than half of the world’s population. It is also estimated that around 60% of Sub-Saharan Africa’s population (80% in some countries) rely on small or micro-scale farming as their primary source of income, accounting for 80% of the farms on the continent.
Irrespective of this feat, the agricultural sector has suffered from low productivity resulting in continued food insecurity, poor nutrition, lack of market access due to low agricultural financing, ignorance of resource -efficient practices and limited access to agricultural innovations. These issues which are further exacerbated by climate change and environmental degradation require increased prioritization by key stakeholders to achieve the SDGs on the continent. Agricultural sustainability has the potential to bridge this divide by driving economic development and contributing to greater food security and income generation.
Agricultural sustainability is based on the premise that we must meet the demands of the present without jeopardizing the needs of future generations. As such, environmental health, social equity, and economic profitability are all given equal weight in sustainable agriculture. A critical part of sustainable agriculture is its systems approach to food, feed, and textile production that ensures the health of the farms, local ecosystem and communities affected by the farming system.
This approach emphasizes the need for the protection of not only natural but also human resources. In the case of human resources, social responsibilities such as working and living conditions, gender equality, consumer health and the needs of the community are prioritized. Africa has the potential to become the central focus for sustainable agriculture, agricultural innovation, and food production across the globe as a result of the growth of technology coupled with a large and growing young population. The UN World Population Prospects report states that the world’s population is set to reach 8 billion by November 2022, and the population of Sub-Saharan Africa to double by 2030 making it home to one in every four people on earth.
The African agricultural technology sector
Investment in agriculture is key for economic growth and job creation among Africa’s farmers. The African start-up ecosystem has seen an exponential growth of agricultural technology start-ups (agritech) . However, while some agritech startups have grown into established businesses, just a few have scaled across the continent. This can be seen as a result of several barriers to scaling such as difficult business environments, ecosystems incapable of supporting long-term expansion, a lack of agricultural expertise and skills, and restricted access to and understanding of financial sources.
Despite these barriers, agritechs across Africa are creating technology that boost crop and protein yield, improve farming efficiency and resilience, improve the environmental and sustainability of farming methods, and assist in the provision of financial resources for agricultural operations regardless of the growing impacts of climate change. According to Disrupt Africa, in 2021, African agritech start-ups (spearheaded by Kenya and Nigeria) raised $95,101,000 which accounted for 4.4% of total funding for African tech start-ups, a 8.6% increase from 2020. In 2021, agricultural financial technology investments on the continent reached $75million, a significant increase when compared to the $10 million of 2020. Thus, the agritech sector still pales in attracting funding when compared to other tech sectors such as fintech, mobility and e-commerce across the continent.
Researchers point to the perceived risk of agriculture as a business and low return on investment as one of the main drivers of the funding gap within the sector. While investment is available at the early funding stages (pre-seed and seed stages), there has been a low number of institutional investors, such as impact investors, venture capitalists, private equity firms and DFIs investing past the seed stage.
A growing shift in investment to sustainable agriculture models
The World Bank states that $80 billion in investments annually will be needed for Africa to reach its agricultural potential. This further reiterated by Mckinsey and Company in their article “Winning in Africa’s agricultural market” where it is stated that significant investment will be made across the continent. “Sub-Saharan Africa will need eight times more fertilizer, six times more improved seed…… Much investment will also be needed in basic infrastructure, such as roads, ports, and electricity, plus improvements in policies and regional trade flows.”
Consequently, international and local funders (public and private) are rising up to the challenge to help achieve Africa’s agricultural potential sustainably. Institutions such as the CDC group, Phatista and Silver Street Capital, are now increasingly opting to invest in agritech companies who work via sustainable models as these offer long-term profit as well as positive impacts on people and the environment. There is now an increasing need for businesses that provide farmers with useful training, operating capital, and access to technologies that improve processes within value chains and are also aligned with the Paris accord on climate change.
As a result, more investors and funders are changing their investment criteria to include verifiable impact measurements and processes via sustainability reporting, as well as the quality of the management team, knowledge of agricultural value chains, and revenues.
Now, African agricultural startups who are looking to attract investment will have to not only have a proven business model but also have to show demonstrable impact.
